Sony Accused of Shortchanging Artists on Spotify

American Idol-affiliated label 19 Recordings has filed an updated complaint in an ongoing lawsuit against Sony, claiming that the major label has been shortchanging its artists via streaming service Spotify.

Sony owns an estimated five percent stake in Spotify — with Sony, Warner and Universal's stakes making up an estimated combined 20 percent — and 19 Recordings is accusing the major players of self-dealing by accepting advertising revenue from the streaming service without any of the profits trickling down to the artists.

Via The Hollywood Reporter, the amended complaint (filed against Sony, but implicating the other big labels) reads:

Each of the major record labels also own an interest in Spotify. On information and belief, those other record labels have engaged in the same self-dealing as Sony with respect to the diversion of payments to them, and the below market streaming royalty rates to artists. Together, and individually, Sony and the other major record labels therefore have significant power to exert control over Spotify in order to not only dictate how revenue will be paid, but wrongfully and in bad faith divert money from royalties that must be shared to other forms of revenue that they can keep for themselves .

The original suit filed against Sony accused the company of designating streamed music as "sales" and "distributions" similar to CDs, rather than "broadcasts" or "transmissions" that would require Sony to split income evenly with artists. 19 Recordings, whose roster includes talent show stars Kelly Clarkson and Carrie Underwood, estimates that Sony has shortchanged its artists by approximately $10 million.

The Hollywood Reporter points out that the ruling could have a major impact on the future relationship between artists, labels and streaming services.

"The lawsuit now means even more," the publication writes, "because it's the first case to test whether the record industry establishment and tech industry vanguard are in cahoots at the expense of the creatives."